1. C O M M UF I I TA E S IP R OS TATM S E N T S
N N I NC AL GRA EM
John S. and James L. Knight Foundation
Financial Statements
Years Ended Dec. 3, 2006 and 2005
CONTENTS
2
Report of Independent Certified Public Accountants
Financial Statements
3
Statements of Financial Position
4
Statements of Activities
5
Statements of Cash Flows
6
Notes to Financial Statements
ANNUAL REPORT 2006

2. C O M M UF I I TA E S IP R OS TATM S E N T S
N N I NC AL GRA EM
Report of Independent Certified Public Accountants
ThE TRUSTEES
JOhN S. ANd JAMES L. KNIGhT FOUNdATION
We have audited the accompanying statements of financial position of the John S. and
James L. Knight Foundation (the foundation) as of Dec. 3, 2006 and 2005, and the related
statements of activities and cash flows for the years then ended. These financial
statements are the responsibility of the foundation’s management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the
United States. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. We were not engaged to perform an audit of the foundation’s internal
control over financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
foundation’s internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of the foundation at Dec. 3, 2006 and 2005, and the
changes in its net assets and its cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States.
As discussed in Note 9, the foundation restated the accompanying financial statements as
of and for the year ended Dec. 3, 2005.
Miami, Florida
Feb. 28, 2007
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ANNUAL REPORT 2006

3. C O M M UF I I TA E S IP R OS TATM S E N T S
N N I NC AL GRA EM
Statements of Financial Positon
dec. 31, 2006
2006 2005
(As Restated - Note 9)
ASSETS
Investments:
Cash and cash equivalents $ 18,458,633 $ 62,995,431
Interest, dividends and other investment receivables 79,178,622 23,771,432
(Payable) receivable related to derivative instrument (1,807,168) 4,165,311
U.S. government and agency obligations 254,810,619 124,571,283
International bonds and other obligations 84,030,856 83,965,404
Corporate bonds and other obligations 67,936,849 184,282,261
Common stock of Knight Ridder – 31,650,000
Other equity securities 757,886,057 656,166,445
hedge fund investments 474,635,091 482,656,572
Alternative equity investments 421,566,126 318,937,744
105,101,412 97,191,678
Real estate investments
Total investments 2,261,797,097 2,070,353,561
Beneficial interest in remainder trusts 80,827,304 71,369,705
Other assets – 1,153,730
TOTAL ASSETS $ 2,342,624,401 $ 2,142,876,996
LIABILITIES ANd NET ASSETS
Liabilities:
Grants payable $ 76,363,523 $ 105,782,618
Other liabilities 1,606,264 664,265
Pension and other postretirement benefits 843,896 724,765
deferred taxes payable 2,399,297 1,542,523
Total liabilities $ 81,212,980 $ 108,714,171
Net assets:
Temporarily restricted 80,827,304 71,369,705
Unrestricted 2,180,584,117 1,962,793,120
Total net assets 2,261,411,421 2,034,162,825
TOTAL LIABILITIES ANd NET ASSETS $ 2,342,624,401 $ 2,142,876,996
See accompanying notes.
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ANNUAL REPORT 2006

4. C O M M UF I I TA E S IP R OS TATM S E N T S
N N I NC AL GRA EM
Statements of Activities
Year Ended dec. 31
2006 2005
(As Restated - Note 9)
ChANGES IN UNRESTRICTEd NET ASSETS:
Investment activity:
Interest $ 20,034,804 $ 21,950,145
dividends 16,894,591 13,629,283
Net realized gain on sale of investments 191,819,821 205,659,188
Net change in fair value of investments 86,561,557 1,834,077
Less: investments expenses (8,272,948) (7,319,212)
Total investment activity 307,037,825 235,753,481
Contributions received 540,292 1,364,567
Total investment activity and other support 307,578,117 237,118,048
GRANTS APPROvEd ANd ExPENSES:
Community Partners grants 44,542,100 34,652,325
Journalism Initiative grants 21,751,750 25,922,667
National venture Fund grants 5,965,000 13,261,855
Other grants 1,220,444 4,387,300
Grant forfeitures and other (1,857,367) (4,226,985)
direct charitable activities 3,101,317 2,885,404
General and administrative expenses 11,015,462 10,596,494
Federal excise and other taxes, net 3,347,533 4,065,260
Total grants and expenses 89,086,239 91,544,320
Increase in unrestricted net assets from operating activities 218,491,878 145,573,728
Effect of adoption of recognition provision of SFAS No. 158 700,881 –
Increase in unrestricted net assets 217,790,997 145,573,728
Changes in temporarily restricted net assets:
Change in value of beneficial interest in remainder trusts 9,457,599 (9,822,924)
Total increase in net assets 227,248,596 135,750,804
Net assets at beginning of year, as restated – Note 9 2,034,162,825 1,898,412,021
NET ASSETS AT ENd OF YEAR $ 2,261,411,421 $ 2,034,162,825
See accompanying notes.
ANNUAL REPORT 2006

5. C O M M UF I I TA E S IP R OS TATM S E N T S
N N I NC AL GRA EM
Statements of Cash Flows
Year Ended dec. 31
2006 2005
(As Restated - Note 9)
OPERATING ACTIvITIES
Change in net assets $ 227,248,596 $ 135,750,804
Adjustments to reconcile change in net assets to net cast used
in operating activities:
Net realized gain on sale of investments (191,819,821) (205,659,188)
Net change in fair value of investments (86,561,557) (1,834,077)
Change in value of beneficial interest in remainder trusts (9,457,599) 9,822,924
Changes in operating assets and liabilities:
Interest, dividends and other investment receivables (49,434,711) (19,935,154)
Other assets 1,153,730 (443,308)
Grants payable (29,419,095) (14,964,139)
deferred taxes 856,774 1,542,523
Pension and postretirement liability 941,999 (120,938)
Other liabilities 119,132 135,213
Net cash used in operating activities (136,372,552) (95,705,340)
INvESTING ACTIvITIES
Proceeds from sale of investments 620,840,164 763,833,772
Purchases of investments (529,004,410) (653,602,940)
Net cash provided by investing activities 91,835,754 110,230,832
Net change in cash and cash equivalents (44,536,798) 14,525,492
Cash and cash equivalents at beginning of year 62,995,431 48,469,939
Cash and cash equivalents at end of year $ 18,458,633 $ 62,995,431
See accompanying notes.
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ANNUAL REPORT 2006

6. C O M M UF I I TA E S IP R OS TATM S E N T S
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Notes to Financial Statements
1. ThE ORGANIzATION
The John S. and James L. Knight Foundation (the foundation), a nonprofit corporation,
promotes excellence in journalism worldwide and invests in the vitality of 26 U.S.
communities.
2. SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
Cash and cash equivalents are composed of various operating accounts and highly liquid
investments with original maturities of 90 days or less.
Property, Plant and Equipment
The foundation records property, plant and equipment as an expense in the year
purchased. Property, plant and equipment purchased for 2006 and 2005 was approximately
$32,000 and $276,000, respectively, of which approximately $2,000 and $23,000,
respectively, are reflected in “General and administrative expenses” with the remainder
being reflected in “investment expense” in the Statements of Activities.
Program-Related Investments (PRIs)
In accordance with Section 9 of the Internal Revenue Code (the code), the foundation is
permitted to make investments that are related to its philanthropic programs. These
investments are anticipated to have a return lower than fair value. In the year of the
investment, the foundation receives a credit toward its distribution requirement. These
investments are treated as grants in the year they are approved. To the extent the
investment is recovered by the foundation, the recovery is recognized as a negative
distribution. Recoveries are reflected in “Grant forfeitures and other” in the Statements of
Activities.
Use of Estimates
The presentation of financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements. Estimates also affect the reported
amounts of investment activity and expenses during the reporting period. Actual results
could differ from those estimates.
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7. C O M M UF I I TA E S IP R OS TATM S E N T S
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2. SIGNIFICANT ACCOUNTING POLICIES (continued)
deferred taxes
The foundation follows the policy of providing for federal excise tax on the net appreciation
(both realized and unrealized) of investments. The deferred federal excise tax in the
accompanying financial statements represents tax provided on the net unrealized
appreciation of investments.
Implementation of FASB Statement No. 158
On Sept. 29, 2006, the Financial Accounting Standards Board (FASB) issued Statement No.
58, Employers’ Accounting for Defined Benefit Pension and other Postretirement Plans,
an amendment of FASB Statements No. 87, 88, 06, and 32(R) (Statement 58). Statement
58 requires entities to:
• Recognize the overfunded or underfunded status of a single employer defined
benefit postretirement plan as an asset or liability in its statement of financial
position and to recognize changes in that funded status in unrestricted net assets
in the year in which the changes occur. The funded status of the plan is measured
as the difference between the fair value of plan assets and the benefit obligation at
the measurement date for each plan.
• Measure the funded status of a plan as of the date of its year-end statement of
financial position, with limited exceptions.
All entities must implement the recognition and disclosure requirements related to the
funding status for fiscal years ending after June 5, 2007, and the measurement date
requirements for fiscal years ending after Dec. 5, 2008. As early adoption of Statement
58 was permitted by FASB, the foundation has decided to adopt the provisions of
Statement 58 for the fiscal year ended Dec. 3, 2006.
During 2005, the foundation pension asset was reported in the statement of financial
position as “other assets” while the liability for other postretirement benefits was included
in the “other liabilities” category. As a result of implementing Statement 58 in 2006,
pension and postretirement liabilities are combined in one caption in the statement of
financial position.
Reclassification
Certain amounts in the prior year’s financial statements have been reclassified to conform
with the current year’s presentation.
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8. C O M M UF I I TA E S IP R OS TATM S E N T S
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2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Net Asset Accounting
The foundation reports information regarding its financial position and activities according
to the following two classes of net assets:
• Unrestricted net assets are not subject to donor-imposed stipulation or the
restrictions have expired.
• Temporarily restricted net assets are subject to donor-imposed stipulations that
can be fulfilled by actions of the foundation or that expire by the passage of time.
3. INvESTMENTS
The investment goal of the foundation is to invest its assets in a manner that will achieve a
total rate of return sufficient to replace the assets spent for grants and expenses and to
recoup any value lost due to inflation. To achieve this goal, some investment risk must be
taken. To minimize such risk, the foundation diversifies its investments among various
financial instruments and asset categories, and uses multiple investment strategies and
investment managers. Key decisions in this regard are made by the foundation’s
investment committee, which has oversight responsibility for the foundation’s investment
program. The committee identifies appropriate asset categories for investments,
determines the allocation of assets to each category and approves the investment
strategies employed. Effective March , 2005, the foundation engaged Cambridge
Associates LLC (Cambridge), an independent consulting firm, to execute the investment
program, including the engagement of investment managers, legal advisers, and
management of the foundation’s holdings in Knight Ridder common stock and strategic
allocations to index funds and limited partnerships. All financial assets are held in custody
for the foundation in proprietary accounts by a major commercial bank, except those
assets that have been invested in limited partnerships, hedge funds or in certain products
with multiple investors, such as index funds, all of which have separate custodial
arrangements appropriate to their legal structure.
Approximately 9 percent and 52 percent of the foundation’s financial assets at Dec. 3,
2006 and 2005, respectively, are invested in institutional mutual funds, publicly traded
securities that are listed on national exchanges, treasury and agency bonds of the U.S.
government, bonds of sovereign foreign governments and investment and non-investment
grade corporate bonds for which active trading markets exist. Such assets are valued at
quoted closing prices at year end. Realized gains and losses and increases and decreases
in fair value on such investments are reflected in the Statements of Activities.
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9. C O M M UF I I TA E S IP R OS TATM S E N T S
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3. INvESTMENTS (continued)
Approximately 23 percent and 2 percent of the foundation’s financial assets at Dec. 3,
2006 and 2005, respectively, were invested in hedge funds and derivative instruments. The
hedge funds utilize a variety of investment strategies which can be broadly categorized as
absolute return and long/short equities strategies. The derivative instruments consisted of
a “portable alpha” product and a swap agreement. These investments are not publicly
listed or traded, and are not liquid investments. Each fund’s investment manager
calculates the fair value of investments on a monthly basis using the valuation guidelines
stipulated in the respective investment agreements. Realized gains and losses and
increases and decreases in fair value on the investments in hedge funds and derivative
instruments are reflected in the Statements of Activities.
Approximately 23 percent and 20 percent of the foundation’s financial assets at Dec. 3,
2006 and 2005, respectively, were invested with numerous partnerships, in which the
foundation is a limited partner, that specialize in making venture capital, buyout, distressed
debt, and equity-based real estate investments. Such investments, typically investments in
private equity or debt securities of companies or properties that are not publicly listed or
traded, are not liquid investments. The value of such investments is determined by the
partnerships’ general partners, who must follow the valuation guidelines, such as
appraisals and comparable company trade data, stipulated in the respective limited
partnership agreements. The Dec. 3 valuations of the investments in limited partnerships
are based upon the value determined by the partnerships’ general partner as of Sept. 30,
adjusted for capital contributions and distributions that occur during the quarter ended
Dec. 3. These amounts may differ from values that would be determined if the
investments in limited partnerships were publicly traded or if the Dec. 3 valuation amount
were currently available. Realized gains and losses and increases and decreases in fair
value on the investments in limited partnerships are reflected in the Statements of
Activities. All limited partnerships are audited annually by independent certified public
accounting firms. As of Dec. 3, 2006, pursuant to its limited partnership agreements, the
foundation is committed to contributing approximately $3,972,000 in additional capital
over the next 0 years to various partnerships. Unpaid commitments at Dec. 3, 2005, were
approximately $308,59,000.
During 2006, the foundation sold all of its holdings in the common stock of Knight Ridder.
At Dec. 3, 2005, the foundation held 500,000 shares of Knight Ridder common stock,
which represented .5 percent of the foundation’s assets.
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10. C O M M UF I I TA E S IP R OS TATM S E N T S
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3. INvESTMENTS (continued)
A detail of fair value and cost by investment class follows:
dEC. 31, 2006 dEC. 31, 2005
Fair value Cost Fair value Cost
Cash and cash equivalents $ 18,458,633 $ 18,458,633 $ 62,995,431 $ 62,995,431
Interest, dividends and other
investment receivables 79,178,622 77,720,723 23,771,432 24,056,633
(Payable) receivable related
to derivative instrument (1,807,168) – 4,165,311 –
U.S. government and agency obligations 254,810,619 259,379,428 124,571,283 126,630,656
International bonds and other obligations 84,030,856 83,302,780 83,965,404 89,409,383
Corporate bonds and other obligations 67,936,849 68,170,671 184,282,261 184,268,296
Common stock of Knight Ridder – – 31,650,000 13,937,500
Other equity securities 757,886,057 600,231,751 656,166,445 566,676,373
hedge fund investments 474,635,091 294,803,297 482,656,572 315,515,710
Alternative equity investments 421,566,126 532,386,279 318,937,744 452,057,031
Real estate investments 105,101,412 87,413,906 97,191,678 80,554,298
TOTAL $ 2,261,797,097 $ 2,021,867,468 $ 2,070,353,561 $ 1,916,101,311
Highly liquid investments with original maturities of three months or less
are reported as cash equivalents.
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11. C O M M UF I I TA E S IP R OS TATM S E N T S
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4. dERIvATIvE FINANCIAL INSTRUMENTS
Some investment managers retained by the foundation have been authorized to use certain
derivative financial instruments in a manner set forth by the foundation’s written
investment policy, specific manager guidelines or partnership/fund agreement documents.
Specifically, derivative financial instruments may be used for the following purposes: ()
currency forward contracts and options may be used to hedge nondollar exposure in
foreign investments; (2) covered call options may be sold to enhance yield on major equity
positions; (3) futures contracts may be used to equitize excess cash positions, rebalance
asset categories within the portfolio, adjust risk exposures within the portfolio, or to rapidly
increase or decrease exposure to specific investment positions in anticipation of
subsequent cash trades; and () futures contracts and options may be used by hedge fund
managers to hedge or leverage positions in portfolios in their respective funds.
Authorization to use these derivative financial instruments currently is restricted to 2
hedge fund managers, who manage investments totaling approximately $7,635,000.
Cambridge is also authorized to use derivatives to execute certain investment strategies.
Derivative financial instruments are recorded at fair value in the Statements of Financial
Position with changes in fair value reflected in the Statements of Activities.
During fiscal 2006 the foundation invested in a “portable alpha” product which is designed
to provide a return in excess of a certain benchmark. The investment manager invests the
principal in a basket of securities that replicates the benchmark, and then leverages the
principal investment and invests in fixed income strategies. The foundation’s equity
investment is benchmarked to the Standard Poor’s 500 Index and is valued at
approximately $27,67,000 at Dec. 3, 2006. The foundation’s fixed income investment is
benchmarked to the Lehman Brothers Treasury 5+Year Index and is valued at
approximately $25,57,000 at Dec. 3, 2006. At Dec. 3, 2006, a payable of approximately
$,807,000 reflecting the fair value of the leveraged investments was reported in “(payable)
receivable related to derivative instrument” on the Statements of Financial Position, and an
equal amount was included in “net change in fair value of investments” in the Statements
of Activities.
During fiscal 2006 the foundation’s exposure to commodities included an account
administered by one manager to replicate the return of the Dow Jones AIG Commodity
Index by using swaps. The account had a swap agreement with two counterparties. The
agreements had three-month terms. The foundation invested collateral equal to the
notional value of the swaps in an investment account also managed by this manager. At
Dec. 3, 2006, the foundation was a party to swap agreements with a total notional value of
approximately $80,000,000. At Dec. 3, 2005, the foundation was a party to swap
agreements with a total notional value of approximately $36,076,000. At Dec. 3, 2006, no
valuation adjustment was required related to the swap agreements.
The foundation had no futures contracts as of Dec. 3, 2006 or 2005.
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12. C O M M UF I I TA E S IP R OS TATM S E N T S
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4. dERIvATIvE FINANCIAL INSTRUMENTS (continued)
In Cambridge’s opinion, the use of derivative financial instruments in its investment
program is appropriate and customary for the investment strategies employed. The
foundation’s management concurs with this opinion. Using those instruments reduces
certain investment risks and generally adds value to the portfolio. The instruments
themselves, however, do involve some investment and counterparty risk not fully reflected
in the foundation’s financial statements. Cambridge does not anticipate that losses, if any,
from such instruments would materially affect the financial position of the foundation, and
the foundation’s management concurs.
5. GRANTS
The foundation records grants in full as expenses when approved. Grants payable at Dec.
3, 2006 and 2005 represents the present value of multiyear grants using an 8.25 percent
and 7.25 percent discount rate, respectively. The foundation made grant payments of
approximately $0,30,000 and $92,577,000 in 2006 and 2005, respectively.
As of Dec. 3, 2006, the foundation had future grant commitments, which are scheduled for
payment in future years as follows:
2007 $ 46,217,400
2008 27,961,976
2009 8,549,546
2010 3,845,000
2011 390,000
86,963,922
discounted to present value (10,600,399)
GRANTS PAYABLE $ 76,363,523
6. FEdERAL ExCISE TAxES
The foundation qualifies as a tax-exempt organization under Section 50(c)(3) of the code
and, with the exception of unrelated business income from debt-financed, passive
investments, is not subject to federal or state income tax. However, the foundation is
classified as a private foundation and is subject to a federal excise tax of 2 percent (or
percent under certain circumstances) on net investment income and net realized gains, as
defined by the code. The foundation expects to qualify for the percent tax rate in 2006 and
was subject to the percent tax rate in 2005. A deferred excise tax provision of
approximately $857,000 on net unrealized gains on investments was recognized during
the year ended Dec. 3, 2006.
Total excise and other taxes paid by the foundation for the years ended Dec. 3, 2006 and
2005 amounted to approximately $2,5,000 and $2,287,000, respectively.
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13. C O M M UF I I TA E S IP R OS TATM S E N T S
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7. EMPLOYEE PENSION PLAN ANd OThER POSTRETIREMENT BENEFIT PLANS
The foundation sponsors a pension plan with defined benefit and cash balance features for
its eligible employees. The pension benefits for all employees hired prior to Jan. , 2000,
will be the greater of the benefits as determined under the defined benefit feature of the
pension plan or the cash balance feature of the pension plan. The pension benefits for all
employees hired on or subsequent to Jan. , 2000, will be determined under the cash
balance feature of the pension plan. The foundation also sponsors postretirement medical
and life insurance benefit plans.
The following table sets forth the pension and other postretirement benefits plans’
funded status and amounts recognized in the foundation’s Statements of Activities and
Financial Position:
Other Postretirement
Pension Plan Benefit Plans
Year Ended dec. 31 Year Ended dec. 31
2006 2005 2006 2005
FUNdEd STATUS
Fair value of plan assets $ 9,337,058 $ 8,824,722 $ 762,365 $ 555,529
Benefit obligation (9,536,751) (9,530,853) (1,406,568) (1,245,156)
Funded status of the plan $ (199,693) $ (706,131) $ (644,203) $ (689,627)
Prior service cost $ (178,858) N/A $– N/A
Accumulated gain (loss) (756,254) N/A 234,231 N/A
Effect of FAS 158 implementation
on unrestricted net assets (935,112) N/A 234,231 N/A
Cumulative employer contribution in excess
(deficiency) of net periodic benefit costs 735,419 N/A (878,434) N/A
Accrued benefit liability recognized
in the Statements of Financial Position
(after FAS 158) $ (199,693) N/A $ (644,203) N/A
Accrued benefit asset (liability)
recognized in the Statements of
Financial Position (prior to FAS 158) N/A $ 1,153,730 N/A $ (724,765)
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7. EMPLOYEE PENSION PLAN ANd OThER POSTRETIREMENT BENEFIT PLANS (continued)
Other Postretirement
Pension Plan Benefit Plans
Year Ended dec. 31 Year Ended dec. 31
2006 2005 2006 2005
COMPONENTS OF NET PERIOdIC BENEFIT COST
Service cost $ 463,735 $ 587,500 $ 180,825 $ 137,196
Interest cost 499,207 471,211 67,584 82,582
Expected return on plan assets (663,734) (565,797) (49,024) (32,848)
Amortization of prior service cost 42,798 45,674 84,972 84,973
Recognized actuarial loss 76,305 68,104 – 10,865
Net periodic benefit cost $ 418,311 $ 606,692 $ 284,357 $ 282,768
Actual return on plan assets $ 1,152,568 $ 438,727 $ 107,816 $ 23,853
Employer contributions – 1,050,000 130,688 147,556
Employee contributions – – 1,187 1,252
Benefits paid 640,232 342,262 32,855 28,390
ACTUARIAL ASSUMPTIONS
discount rate 5.75% 5.50% 5.75% 5.50%
Expected return on plan assets 8.00 8.00 8.00 8.00
Rate of compensation increase 4.50 4.50 4.50 4.50
hEALTh CARE COST TRENd RATE ASSUMPTIONS
Initial trend rate N/A N/A 12.00% 13.00%
Ultimate trend rate N/A N/A 5.25 5.25
Year ultimate trend is reached N/A N/A 2014 2014
The expected long-term rate of return on plan assets for determining net periodic pension
cost is chosen by the foundation from a best estimate range determined by the actuary by
applying anticipated long-term returns and long-term volatility for various asset categories
to the target asset allocation of the plan.
The calculations related to other postretirement benefit plans do not anticipate any savings
from the Medicare Prescription Drug, Improvement and Modernization Act of 2003.
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7. EMPLOYEE PENSION PLAN ANd OThER POSTRETIREMENT BENEFIT PLANS (continued)
Expected benefit payments are as follows:
Other
Postretirement
Pension Plan Benefit Plans
2007 $ 491,701 $ 42,768
2008 670,720 55,612
2009 956,454 71,247
2010 636,253 81,254
2011 619,593 86,650
2012 - 2016 5,237,769 520,464
During 2007, the foundation is not required to make any contributions to the pension or to
the other postretirement benefit plans. The foundation may choose to make a contribution
during 2007.
The investment goal for plan assets is to provide sufficient liquidity to meet payout
requirements while maintaining safety of principal through prudent diversification. During
2006 asset allocation targets for the pension plan were large-cap domestic equity, 0
percent, small-cap domestic equity, 0 percent, international equity, 20 percent, domestic
fixed income, 20 percent, and TIPS, 0 percent. During 2006 asset allocation targets for the
other postretirement benefit plans were large-cap domestic equity, 65 percent, small-cap
domestic equity, 0 percent, international equity, 0 percent, domestic fixed income, 0
percent, and domestic high yield, 5 percent.
A detail of fair value of plan assets by investment class follows:
Other Postretirement
Pension Plan Benefit Plans
dec. 31 dec. 31
2006 2005 2006 2005
Cash and cash equivalents $ 96,878 $ 680,119 $ 29,123 $ 21,597
Interest, dividends and other
investment receivables 25,905 28,794 104 66
U.S. government and agency obligations 1,760,568 1,516,581 – –
Corporate bonds and other obligations 703,453 465,845 87,038 44,131
Equity securities 6,750,254 6,133,383 646,100 489,735
Total $ 9,337,058 $ 8,824,722 $ 762,365 $ 555,529
In addition, the foundation sponsors a defined contribution plan for its eligible employees
for which it has no fixed liabilities. Effective Jan. , 2002, the foundation’s defined
contribution plan was amended to add an employer matching contribution component.
During 2006 and 2005, the foundation made contributions to the defined contribution plan
of approximately $55,000 and $52,000, respectively.
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16. C O M M UF I I TA E S IP R OS TATM S E N T S
N N I NC AL GRA EM
8. LEASES
The foundation has a lease for approximately 2,300 square feet of office space in Miami,
Fla., which expires in 203. The foundation also had one lease for equipment, which
expired in 2006. Rental expense for office and equipment leases for 2006 and 2005 was
approximately $799,000 and $758,000, respectively. Future minimum lease payments for
the office lease are as follows:
2007 $ 705,066
2008 721,029
2009 736,993
2010 752,957
2011 768,921
Thereafter 1,244,286
Total $ 4,929,252
9. BENEFICIAL INTEREST IN REMAINdER TRUSTS
The foundation has a beneficial interest in charitable remainder trusts established by John
S. Knight. Under the terms of the trusts, distributions are made from the trusts to
designated beneficiaries for the remainder of their lives. The remainder of the assets in the
trusts will be transferred to the foundation. All of the assets of the trusts are administered
and held in the custody of a commercial bank.
The foundation values its interest in the trusts using the methodology described in the
National Committee on Planned Giving’s 200 publication, Valuation Standards for Charitable
Planned Gifts. This methodology is a two-step process starting with the fair market value of
the assets. The first step uses a 5 percent payout rate, life expectancy based on IRS
Mortality Tables and assumed investment returns to determine the value of the interest at
its projected termination. The second step discounts this future value using the Consumer
Price Index. As of Dec. 3, 2006 and 2005 the value of the foundation’s interest in the
remainder trusts was approximately $80,827,000 and $7,370,000.
The trusts were established in 975 and became irrevocable in 98, however, the
foundation had not recognized its beneficial interest in the trusts. The accompanying
financial statements have been restated in order to reflect the foundation’s beneficial
interest in the trusts and the related impact on the statement of activities. As a result of the
restatement, temporarily restricted net assets as of Dec. 3, 200 increased by $8,93,000
and net assets at the end of 200 increased from $,87,29,000 to $,898,2,000. A
reduction in the value of the beneficial interest of $9,823,000 was reflected in the 2005
statement of activities, and a beneficial interest in remainder trusts and temporarily
restricted net assets of $7,370,000 are reported in the Dec. 3, 2005 statement of financial
position. As a result, the following changes occurred on the statement of financial position:
total assets and total liabilities and net assets increased from $2,07,507,000 to
$2,2,877,000 and total net assets increased from $,962,793,000 to $2,03,63,000. In
addition, the increase in net assets changed from $5,57,000 to $35,75,000.
6
ANNUAL REPORT 2006